Supply lack continues to force property prices up

Supply lack continues to force property prices up

A lack of property supply is continuing to force house prices up, with the average property price now just shy of £200,000, growing by 8.5 per cent in the 12 months to April, Halifax’s monthly house price index has revealed.

House prices increased by 1.6 per cent between March and April and now stand at £196,412.

Martin Ellis, housing economist at Halifax, said: “House prices in the three months to April were 2.2 per cent higher than in the preceding three months.

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“This measure of the underlying rate of house price growth fell for the first time in 2015 following three successive rises. In contrast, annual house price growth increased slightly, from 8.1 per cent in March to 8.5 per cent.

“Nonetheless, the annual rate remains in the narrow range of 8 per cent to 9 per cent where it has been since the start of 2015 and is below last July’s peak of 10.2 per cent.”

He added that housing demand is being supported by a number of factors including economic improvement, rising employment and low mortgage rates, however supply remains tight with a general shortage of properties available for sale.

Mr Ellis said: “This combination has kept house price inflation steady in recent months with prices increasing by 2.2 per cent to 2.6 per cent on a quarterly basis and at an annual rate of 8 per cent to 9 per cent.

“House prices are continuing to increase more quickly than average earnings despite the return to real earnings growth over the past few months.

“The resulting rise in the level of house prices in relation to earnings should constrain house price growth and activity over the remainder of the year. The annual rate of house price growth is forecast to end the year at 3 per cent to 5 per cent.”

Jeremy Duncombe, director for the Legal and General Mortgage Club, added that although house price rises are slower than they were last year, “they are still rising faster than inflation”.

“A big part of this problem is we are not building enough homes to keep up with demand which means house prices are pushed up.”

However, the Conservative party, prior to the general election, pledged to build 200,000 starter homes over the course of the next parliament, reserved for first-time buyers under the age of 40 and sold at 20 per cent less than the market price.

Mr Duncombe said it is “vital” that they deliver on this promise.

He added: “We need around 250,000 new homes to be built each year to keep up with demand. At the moment we are well below this level so it needs to be at the top of the political agenda as we go into the next parliament.”